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 Improper patent marking attracts large fines in the US
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5 February 2010
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| Aritcle by Andrew Massie
| A recent US court decision has highlighted the need for patent owners to ensure that products marked as patented are in fact covered by relevant patent protection.
In general, it is prohibited to mark products as patented if they are not actually covered by one or more patents (USC 292). This might occur when patent coverage for a product expires, or when a product is modified from a form that was originally covered, or when the claims of a patent are modified.
In the US, the prescribed penalty (USC 292 (a)) for falsely marking products as patented is a maximum fine of US$500. Until recently, US courts have applied the fine for each offence of incorrect or false marking. However, a recent US decision by the US Court of Appeals for the Federal Curcuit (The Forest Group Inc v Bon Tool Company, Fed Cir No 2009-1044) has clarified that the legislation requires a per article fine. Thus, if a client sells a batch 100 products all falsely marked, the fine would previously have been calculated at no more than $500. However, if the fine is applied according to the recent US decision, the fine would be up to $50 000.
In the US decision, Forest Group, Inc owned a US patent relating to a spring-loaded parallelogram stilt used in construction. Forest Group had the right to individually mark any of its stilt products as patented as long as the stilts were covered by its patent. However, the patent required a feature that the actual stilts did not include. Accordingly, the stilts marked by Forest Group as being patented were not in fact covered by their patent.
In a first decision, the US District Court found against Forest Group on the question of false marking and imposed a fine of $500. However on appeal, the court decided that the fine should apply to each stilt that had been incorrectly marked. This increased the total fine significantly.
A finding of false marking in the US requires an intention to deceive the public. In the Forest Group case, false marking had occurred for several years, but the court did not find an intention to deceive for the full period. Rather, the court identified a date from which Forest Group clearly had knowledge of its false marking and thus from when this requirement was clearly met.
In Australia, Section 178 of the Patents Act 1990 provides that it is an offence to “…falsely represent that an article sold by him or her is patented in Australia, or is the subject of an application for a patent in Australia”. The penalty is A$6,000 and Ministerial approval is required before a prosecution can be commenced.
In addition, the Trade Practices Act 1974 contains provisions prohibiting false representations about goods.
Patent owners need to be diligent in periodically reviewing the products they mark as patented to ensure that they discontinue marking products when relevant patent protection no longer applies or expires.
In the US in particular, any fines that a court imposes for false marking are shared between the US Government and the party that brings the proceedings, so that where your competitors notice false marking, they might be the party to initiate the proceedings.
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